MGEA02H3 Chapter : Week 9 study guide

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lavenderdonkey6

1 Dec 2010

School

UTSC

Department

Economics for Management Studies

Course

MGEA02H3

Professor

Gordon Cleveland

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MGEA02H3 Full Course Notes

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Chapter 12 economic efficiency and public policy notes. N monopoly is not allocatively efficient because the monopolist"s price always exceeds its marginal cost. N one of the most important issues in public policy is whether, and under what circumstances, government action can increase the allocative efficiency of market outcomes. N natural monopoly an industry characterized by economies of scale sufficiently large that one firm can most efficiently supply the entire market demand. N crown corporations in canada, business concerns owned by the federal or provincial government. N marginal-cost pricing setting price equal to marginal cost so that buyers for the last unit are just willing to pay the amount that it costs to make that unit. N when a natural monopoly with falling average costs sets price equal to marginal cost, it will suffer losses. N competition policy policy designed to prohibit the acquisition and exercise of monopoly power by business firms.

Related Questions

1.Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital?

a.Cost of financial capital paid from firm

b.Higher retained earnings from past profits

c.Tax credits for physical capital investments

d.Imposition of hurdle rates of interest

2.If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its

a)minimum price efficiency

b)utility-maximizing efficiency

c)allocative efficiency

d)productive efficiency

3.When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the _______________ of investing in physical capital.

a.Typical hurdle rate

b.Hurdle rate premium

c.Degree of risk

d.Opportunity cost

4.Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it?

a.Conditions of entry in a certain industry

b.Natural monopoly

c.Prices that can be charged

d.Quantities that can be produced

5.A natural monopoly occurs when the quantity demanded is the minimum quantity it takes to be at the bottom of the long-run average cost curve

a.Greater than

b.Less than

c.Equal to

d. a or c above

6. The demand curve perceived by a perfectly competitive firm

a.Shows that such a firm is a price-maker

b.Shows economies of scale over a large range of output

c.Is horizontal

d. All of the above

rubydolphin112

Q8. To arrive at a logical determination of a firm's optimum output, economists assume that the firm seeks to
a. maximize output
b. minimize cost
c. maximize profit or minimize loss
d. maximize price

Q9. So long as marginal cost is rising, average variable cost must rise.
a. true
b. false

Q10. As output increases, marginal cost increases, reaches a maximum, and then falls.
a. true
b. false

Q11. Which of the following is the best example of variable cost?
a. depreciation on a building
b. property taxes
c. wages
d. rent paid for one's building

Q12. If the AVC is $12, the AFC is $4, the AR is $20, and output is 6,000 units, the total profit is
a. $72,000
b. $48,000
c. $24,000
d. negative $96,000

Q13. Under perfect competition, if a firm is suffering a loss,
a. MR exceeds ATC
b. AR equals AVC
c. AR equals ATC
d. AR is less than ATC

Q14. Elaine's firm is in a perfectly competitive industry. Why doesn't Elaine try to sell more of her product by lowering its price below the market price?
a. her demand curve is not elastic
b. doing so would be considered unethical price chiseling
c. her competitors would not allow it
d. she can sell all she wants at the market price

Q15. In the long run, perfect competition results in firms producing
a. at the minimum point of their long-run average cost curves, which indicates allocative efficiency
b. where price equals marginal cost, which indicates economic efficiency
c. where price equals marginal cost, which indicates the optimal scale of operation
d. at the minimum point of their long-run average cost curves, which indicates economic efficiency

Q16. On a graph of average cost curves, the space between ATC and AVC represents AFC.
a. true
b. false

Q18. If MC equals MR at a point greater than ATC, the perfectly competitive firm will
a. sustain a loss
b. shut down
c. make an economic profit
d. expand output

Q19. Since all producers have the same average revenue under conditions of perfect competition, they all have the same profits in the short run.
a. true
b. false

Q20. If the entry of new firms in a perfectly competitive industry substantially increases the market demand for resources,
a. this reduces the market price of resources
b. this raises the market price of resources
c. the market price of resources does not change
d. this lowers the ATC curves of individual firms

Q22. Under conditions of perfect competition, profits exist whenever AR is above AVC at equilibrium output.
a. true
b. false

Q23. Under perfect competition, market price is determined by market demand and supply.
a. true
b. false

Q24. If one firm in a perfectly competitive industry is somehow able to produce at a lower cost than competing firms in the short run,
a. the competing firms will adopt similar production techniques in the long run
b. the more efficient firm will earn higher profits than the competing firms in the long run
c. the competing firms will earn higher profits than the more efficient firm in the short run
d. the competing firms will go out of business in the long run

MGEA02H3 Chapter : Week 9 study guide

MGEA02H3 Full Course Notes

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